Waymo Adds High Octane Tailwind in Alphabet’s (GOOGL) Sails

Alphabet (GOOGL) has become an AI sensation again, as investors flock in following the integration of Gemini 3 into Search, making last year’s panic over Google being “late” seem rather ridiculous in hindsight. Moreover, Google’s homemade TPU chips, once a footnote on filings, are now being pitched as a cheaper, power-efficient way to run all this new AI traffic. This has eased concerns about Nvidia (NVDA) dependency and margin pressure, flipping the narrative 180 degrees. Instead of an old giant under siege, investors now see a company that might actually be leading the AI race.

But tucked inside the same ticker is another AI story that could matter just as much over time: Waymo, another key catalyst that has me remaining stoutly bullish on the stock.

Waymo’s Slow Burn to Scale

To put this in perspective, Waymo began as Google’s self-driving project and was then spun out as an Alphabet subsidiary in 2016. It then spent several years in an awkward “cool tech with unclear economics” phase while regulators debated the rules, and commercialization timelines kept slipping. You may remember how, at the time, investors hopped from crypto hype to data center developments, paying little attention to the space. But Waymo continued to do the tedious work. It was recording more miles, collecting more data, and quietly tweaking its software.

That slow grind is finally showing up in the numbers. Early last year, Waymo was doing ~100,000 paid rides per week in Phoenix, SF, and LA. By roughly this past May, Alphabet was talking about more than 250,000 weekly paid trips across these areas, a 5x jump in just over a year. Notably, the fleet has now logged over 100 million fully autonomous miles, including tens of millions in “rider-only” mode with no safety driver. So, Waymo today has probably the deepest safety dataset in the space.

Waymo self-driving Jaguar I-PACE in Los Angeles, California.

What really matters here is that those miles aren’t just coming from a few tiny test loops anymore. Regulators have signed off on paid, fully driverless service across about 250 square miles in SF and LA. On top of that, you’ve got freeway runs and airport trips happening around Phoenix and the Bay Area now. No other U.S. player is doing that at anything close to this kind of real, commercial scale.

And now, Alphabet and Magna are ramping up an integration plant in Arizona that is expected to add about 2,000 more Jaguar I-Pace robotaxis. If they hit that target, the fleet will roll toward roughly 3,500 vehicles by 2026. At the same time, new U.S. markets like Miami, Dallas, Houston, San Antonio, and Orlando are being added, with Atlanta, Washington, D.C., and London also in the testing pipeline. In other words, the road network Waymo can serve is expanding very quickly.

The Monetization Turn

Moving on to the income statement, Waymo is still a drop in the bucket. Alphabet rolls it into “Other Bets,” which in Q3 generated $344 million of revenue and a $1.4 billion operating loss – less than half a percent of Alphabet’s $102.3 billion in quarterly sales. Whatever slice belongs to Waymo, it’s tiny next to Search and YouTube.

But for us investors, the slope matters more than the base. Waymo’s weekly rides are rising fast, and its geographic coverage keeps widening. Also, regulators in multiple states now permit fully driverless commercial service without a safety driver. So you can see how, as the Arizona plant produces a growing number of vehicles, adding a new city becomes a routine rollout that allows for fast scaling (i.e., an acceleration phase is incoming). You map the streets, fine-tune the system, and keep improving it with over-the-air updates. Once that process is set, revenue can grow much faster than the costs to expand.

That is why the sell side is finally putting numbers on Waymo. In one scenario suggested by Bloomberg Intelligence, Waymo’s revenue is projected to grow from the low hundreds of millions this year to more than $7 billion by 2030, assuming ride volumes keep compounding and the company can roll out into new markets on roughly the same schedule.

Also, Morgan Stanley (MS), looking at the entire autonomous-vehicle space, thinks robotaxis and self-driving services together could generate around $200 billion in annual global revenue by 2030, with early, proven platforms like Waymo well positioned to capture a meaningful slice of that.

None of that is assured, especially when you have risks such as a serious accident, political backlash, or consumer hesitation that could slow everything. However, Waymo finally behaves like a business with visible operating leverage, not like the perpetual moonshot it once seemed.

Google is the Worst-Kept Secret on Wall Street

All of this rides on top of an Alphabet that already looks far stronger than it did during the “Google is late to AI” scare. In Q3, Google Services revenue grew 14% year-on-year, Search rose 15%, YouTube ads also rose 15% while Cloud expanded 34%. Management pointed directly to AI Overviews, AI Mode, and Gemini-powered tools as key drivers of query growth and better ad performance. Meanwhile, the Gemini app has more than 650 million monthly active users, and Google’s models are processing billions of tokens per minute via APIs.

The market is taking notice of these achievements, chasing Alphabet stock higher, which now trades at a forward P/E of 30x, notably higher than the 15x-25x range of the past three years. That’s a clear re-rating from its “cheap mega-cap” era.

Which is why, despite being bullish on Alphabet’s AI stack and Waymo’s long-run economics, I struggle to call GOOGL “undervalued.” However, the stock is not expensive either, especially since EPS growth in the mid- to high-teens is likely to be maintained for years to come. Additionally, Waymo’s potential may not yet be fully reflected in Wall Street’s estimates.

Is Alphabet a Good Stock to Buy Now?

GOOGL now holds a Strong Buy consensus on Wall Street, based on the view of 38 analysts. Specifically, GOOGL stock now carries 31 Buy ratings and seven Hold ratings. No analyst rates the stock a sell. Also, at $312, the average GOOGL stock price forecast implies ~3% downside potential over the next 12 months. However, this is likely because most analysts have yet to update their price targets post-sentiment shift.

See more GOOGL analyst ratings

Alphabet Poised for the Next AI Supercycle

Alphabet’s AI resurgence and Waymo’s accelerating commercialization give the company multiple long-term growth engines. Sure, the stock is no longer the bargain it was a year ago. However, the investment case has also become way more certain, as the company has now strengthened its competitive position, boasts a durable earnings trajectory, and offers optionality from autonomy, keeping the risk-reward compelling. I believe this makes Alphabet well-positioned for the next phase of the AI cycle.